REVALUING THE ECONOMY, PART I:

MONEY AS STORED ENERGY

ENERGY IS WORK
Whether you are a tree-hugging environmentalist or a hard-line capitalist (or somewhere
in between), there are opportunities for agreement. While these extremes maintain
different approaches, both recognize the intrinsic importance of natural resources as a
crucial (if not foundational) element of a productive economy. Most fundamental of these
natural resources is energy. According to Merriam-Webster, "energy" is defined as a
fundamental entity of nature that is transferred between parts of a system in the
production of physical change within the system and usually regarded as the capacity for
doing work. Thus, in the most literal sense, the recognition of energy as a force of
transformation is tantamount to the appreciation of work as a source of wealth creation.
POTENTIAL AND KINETIC ENERGY: CAPITAL AND LIQUIDITY
Then how, in a capitalist system, does wealth create more wealth, without work? How
does our financial system allow so many (until recently) to grow their portfolios steadily
without exerting much energy of their own? Aside from the usual argument about
globalization and the exploitation of sweatshops, the critics should have no qualms with
the undeniable benefits produced by capitalist economic theory: capital is stored energy
and thus, stored work. As the "capacity for doing work," stored energy (or potential
energy) can literally work and thus invest itself in creating more wealth (e.g. by
employing more workers or producing more efficient technology). This is possible by
virtue of the fact that the energy is stored (saved) and invested rather than consumed and
turned to waste. Rather than converting the potential energy to matter (material items),
when one turns stored energy into kinetic energy (invests it), this is literally the creation
of "liquidity" -- the substance of transformation. Like a living being, this energy can
actually perform work as it is "transferred between parts of [the] system in the production
of physical change."
CREATING VALUE: TURNING LEAD INTO GOLD
I will never forget entering 9th grade biology, in which my teacher began the year asking:
What is life? The brief conclusion we came to, in introducing the course: life is the
flow of energy." Energy is fundamental to being alive. However, the best way of
describing energy may be accomplished by using an alchemical term: quintessential
(literally meaning "fifth essence"). In alchemy, the "philosopher's stone" is the fifth
element that can transform base metals into pure gold. Of course, this metaphor becomes
clear once one gets over the usual stigmas associated with alchemy (which Newton and
many others studied privately). As a symbolic language, alchemy describes the process of
transforming non-value into value.
FIAT CURRENCY: LET THERE BE... MONEY!
Value is measured and represented by money. Thus, our personal stockpile of stored
energy is literally backed by dollars and cents (or our faith in them). But something here

is upside down. If our personal wealth is backed by paper currency and metal coinage,
what are those bills and coins backed by? Herein lies the fiasco of fiat currency (Latin for
let there be currency appropriate for an economy that worships itself). While legal
tender of some sort has backed our wealth for centuries, the US dollar itself has survived
without backing for only the last 38 years (the government ended the convertibility of the
US dollar for gold in 1971). Prior to this fiat system, currency was backed by
commodities most commonly gold, but also silver, and centuries earlier, salt and cattle.
In prison camps, cigarettes often become the commodity of value.
COMMODITIES: A SOLID FOUNDATION FOR LIQUIDITY
Commodities provided a stabilizing uniformity for monetary systems. These commodities
could be exchanged with a certainty of value, an objective method of measurement, and a
lack of qualitative differences in the commodity itself something to have faith in and
something that will not lose value because it is intrinsically valuable. Gold is gold, and
differences can be measured objectively by assessing its purity (24 karat is pure gold).
Gold was a favored commodity because of its fungibility (equal value without qualitative
difference), durability (the value will not be lost), and its ductility (the ability to melt it
and divide it into new units of denomination). Surely, its high luster also made it valuable
by increasing its desirability and demand. However, the aesthetic beauty of gold has more
to do with its economic value and less to do with its utility to the economy as a
standardized currency-backing commodity.
However, this article is not an attempt to rejuvenate the gold standard (sorry Ron Paul),
nor is it an attempt to revitalize the call for a populist free silver revolution, and most
certainly, it is not an appeasement to OPEC proposals for an oil-based international
monetary system (petrocurrency). Rather, this article is a call to think outside-the-box
(and outside the basket for those who non-creatively push for a basket of
commodities as monetary backing).
WHAT GOES UP, MUST COME DOWN
The one upside to fiat currency, as pointed out all too often by its proponents, is that it is
not limited by a rivalrous and finite resource essentially, it is unlimited. This aspect of
fiat currency is useful because it provides policymakers with flexibility in maintaining the
economy (and fixing it in times like these), while also providing an endless horizon for
economic growth and wealth creation. Leaps in standards of living are no longer limited
by how much gold we have stored in Fort Knox we can always print more money to
adjust to the size and demands of our exponentially growing economy.
The catch is obvious and it can be understood through all sorts of analogies. For
example, what happens when an empire grows too large? We literally stretch ourselves
thin beyond the constraints of our resources. Cracks emerge in our foundations as the
free market attempts to make room for more wealth. But what are these constraints
actually? Do constraints still exist in an age with no strings attached, in which the
dollar is literally tied to nothing a balloon filled with air, ready to burst (or at least float
away, ungrounded)? Of course they do the danger lies, in the fact that they are no
longer visible, because we have lost the connection between our magical economic

creation (the dollar), and the reality regarding the availability and allocation of resources
in our environment (no, not just forests I refer to the environment in the broadest sense,
including: human capital, technological advancements, and yes, even oil itself).
E. PLURIBUS UNUM: A POSSIBLE FUTURE
Most fundamentally, we are constrained by the amount of energy we have flowing
through the economy manpower or horsepower. Inefficiencies and limitations
(unemployment, dead capital) are the result of a conventional wisdom that is obsessed
with how to produce energy rather than on how to harness it. It is all around us. Energy
needs to be stored (capital) so that it can be easily convertible (liquid). Capital and
liquidity is to the economy as batteries and converters are to electricity.
Energy is the one that underlies and backs the many forces of nature (E. Pluribus Unum:
"Out of Many, One" or for you LOST fans: Everything That Rises Must Converge).
Physics teaches us this as well. Modern physics (string theory and quantum mechanics)
takes this concept one step further by arguing that all matter is merely a manifestation of
different vibrating frequencies of energy. Einstein found the energy-matter conversion
itself: E=mc2. The view of energy through thermodynamics would require too long of a
tangent for an adequate explanation.
The point however, is that unlike gold, oil or other material commodities, energy is both
infinite (at least relative to our size in the Universe), and also, represents the commodity
we truly (or at least should) value most. Energy is the common value of all living beings.
We have an opportunity to recognize this, and literally declare it as the fundamental unit
of societal value.
While my vision would require many decades of preparation, it is, at the very least, very
interesting: I propose energy-backed currency. While energy-backed currency seems
confusing to most at first, after a quick explanation it begins to emerge as a vague but
inspiring vision of a possible future. This explanation, and its ramifications will appear as
Part II of this article, to be released next week. I kindly ask to hold all criticisms of this
yet-to-be expounded proposition until it is afforded the opportunity of a proper
elucidation. However, any questions or comments on anything discussed above (e.g. the
end of fiat currency) are warmly welcomed in the meantime.